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I was playing around with a file posted by another user in the forums, and happened to draw a rectangle on top of it, and then tried to set the stroke to a dashed line. It does not work, remaining a solid line stroke.
On a new document, or other documents, the dashed line stroke works as I expect. For this file (below) the problem occurs in both 1.7 and 1.8. This is the 1.7 version of the file.
dashed-stroke-problem2.afdesign